The UK cannot leave the EU single market and keep the benefits, the EU’s chief Brexit negotiator has said in his first major speech since talks began last month.

Michel Barnier said he had warned the British government there was no cost-free way to leave the single market and said some people in the UK had not understood that Britain cannot leave the EU without losing out.

“I have heard some people in the UK argue that one can leave the single market and keep all of its benefits. That is not possible,” he told the EU’s economic and social committee.

Barnier also dismissed the “no deal is better than a bad deal” slogan favoured by the British prime minister, Theresa May.

He countered that “a fair deal is far better than no deal” and pointed out Brexit talks were not a classic negotiation, where “no deal” meant reversion to the status quo. “In the case of Brexit, ‘no deal’ is a return to a distant past.’’

Barnier said no deal would aggravate losses for both sides, above all the British. He invoked the scenario of 19% tariffs on British beer, wine and spirits entering the continent and 12% on British lamb and fish, most of which is exported to the EU.

British suppliers of industrial parts would have to keep items in stock for a few days rather than a few hours, he said, and would spend more on transport and warehouses, because of bureaucratic hurdles.

He also took aim at the British desire for “frictionless trade” outside the EU customs union. He said: “I have heard some people in the UK argue that one can leave the single market and build a customs union to build frictionless trade. That is not possible. The decision to leave the EU has consequences.”

It is not the first time Barnier has made plain he thinks the British have misunderstood the reality of Brexit. Earlier this week, he dismissed the announcement from the environment secretary, Michael Gove, that the UK was to leave the 1964 London fisheries convention. Barnier tweeted that “UK denunciation” of the convention changed nothing as “EU law/common fisheries policy had superseded it”.

Since the inconclusive general election deprived May of her majority, critics of the “no deal” scenario have gained strength. The chancellor, Philip Hammond, has spoken out against leaving without a deal, although the Brexit secretary, David Davis, maintains Britain should walk away rather than accept “a punishment deal”.

Barnier said the EU was not looking to punish Britain, but he made plain his view that the UK had failed to grasp the EU would act in its own interest to protect the single market.

“You cannot leave the single market and then opt into those sectors you like most, say the automobile industry or financial services. You cannot be half in or half out of the single market,” he said.

“The EU is not only a big marketplace, it is also an economic and social community where we adopt common standards. All third countries must respect our autonomy to set rules and standards … I am not sure whether [these points] have been fully understood across the Channel.”

Stressing the tight timetable, which means the UK is outside the EU in only 20 months’ time, he urged the British to reach agreement on the divorce issues, a financial settlement, EU citizens’ rights and the Irish border. But he was clear that whatever trade deal was agreed would be less advantageous for the British than EU membership.

His speech highlighted the Airbus factory in Broughton, north Wales, whose success was “owing to its ability to attract qualified engineers and technicians from all over Europe”, as well as links to sites in Hamburg and Toulouse.

Round two of the Brexit negotiations is due on 17 July.

Barnier was speaking shortly before the EU and Japan announced a big step towards a landmark trade deal.

Donald Tusk, European council president, hailed the deal as a victory against isolationism and disintegration and took a swipe at claims by Brexit supporters it was easier to do global trade outside of the EU. “Today we have shown that isn’t true,” he said.

Liam Fox, who has UK cabinet responsibility for international trade, said he was pleased to see “encouraging progress on such an ambitious trading agreement”.

The UK will see no benefit from the deal if it leaves the EU customs union but Japan has said it is keen to start trade talks with the UK.